AUDUSD: The pair may be backing off higher prices in the immediate term but continues to hold its bullish outlook in the medium-term. This development leaves directional triggers for the resumption of that trend at the 0.9387 level, its Jan 14’10 high and its 2009 high at 0.9404. Its long-term rising trendline initiated from the 0.6284 level (clearly seen on the weekly time frame) provides more bullish evidence. With this in mine, we have identified possible targets on the upside on an eventual break of the 0.9387/0.9404 level. The levels are its July 27’08 high at 0.9592 and its 2008 high at 0.9848. In our quarterly technical outlook, we also highlighted the possibility of a test of its parity level at 1.0000 if the 0.9387/0.9404 levels break. That ends our upside scenario. What happens if our upside view fails to play out? If the view does not materialize then we should watch the following levels on the downside. The first level will be the 0.9155 level which marks its April 19’10 low where a break will set the pair up for further weakness towards its long term rising trendline now at 0.9098. We think that level should provide a strong support and turn AUDUSD higher in the direction of its primary trend. The danger, however, is that if that level gives in its journey back to the 0.9387/0.9404 level will be slow and tough. Another risk will be a decline towards its Mar 26’10 low at 0.8999. Overall, bull pressure continues to point higher in the medium term with the risk of being a recapture of the 0.9387/0.9404 levels and beyond.
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